The notion of identity in the digital world is constantly changing. All of us interact with businesses, with platforms and with each other in the online realm in vastly different ways. Your digital identity on one platform may be different than what it is on another.
This becomes especially true as we move further into a Web3 world. Web3 can be described as a decentralized, user-centric, and interconnected concept of the internet that leverages distributed systems to redefine how we interact, share information, and conduct online transactions. In Web3, data is distributed and controlled by users in a network using decentralized technologies such as blockchain and peer-to-peer networks.
It’s a radically different concept than the first iterations of the internet over the last few decades. But the online world is already moving towards this Web3 model and beyond.
This means that the decentralization of data is the future of the digital world, and thus the future of digital identity will be decentralized. The evolution to a place where information is more readily shared, transmuted, and diffused among communities. This is beginning to happen in the transition to a Web3 world, and will continue apace as we move even beyond that. This will lead to a radical new level of customer experience, where everything is hyper personalized while preserving privacy.
The decentralized concept will affect digital identity for individual consumers in a number of ways
Privacy and Security
Ideally, a decentralized identity model will lead to enhanced security and greater user privacy and control over data. Users can choose what data to share and with whom, reducing the risk of data breaches and identity theft. Blockchain-based solutions that could be used in a decentralized model will utilize cryptography and distributed consensus mechanisms, making them more secure and resilient to hacking attempts.
Self-Sovereign Identity (SSI)
Self-sovereign identity is a concept that gives the individual consumer ownership and control over their digital identities and what data they will share with third-parties. With SSI, users can present verifiable credentials without revealing unnecessary personal information.
Right now, sharing digital identity across different platforms and services means having to remember (or save) countless different username/password combinations. There is no one “digital passport” to share across platforms, though the concept has been discussed for many years. However, in a decentralized model, users will be able to seamlessly use their identities across different platforms, services, and applications, ultimately leading to a more seamless online experience.
Benefits For Business
A decentralized identity model has positive applications for not only consumers but businesses too.
One such major advantage is much more streamlined, efficient and accurate Know Your Customer (KYC) and Know Your Business (KYB) processes. Instead of every organization having to verify the identity and legitimacy of each customer and business client, they could be verified once and those credentials shared as needed across the digital world. This would save not only massive amounts of time, but also money for organizations when it comes to having to do KYC checks.
Instead of repeatedly verifying identities with different services, users can present already-verified credentials, saving time and resources for both individuals and organizations.
Decentralized identity networks can also help businesses keep fraud off their platforms and protect their users. Traditional identity systems are susceptible to fraud due to centralized repositories of personal data. Decentralized digital identity minimizes the risk of identity fraud by distributing information across a network of nodes, making it harder for malicious actors to manipulate or exploit the data. Furthermore, every users' risk reputations could be based on verified actions and interactions, providing a basis for better fraud and risk decision making and keeping bad actors out of online platforms.
While decentralized digital identity holds immense potential, there are also challenges to overcome, including scalability, user adoption, and creating universal standards. However, decentralized identity networks are clearly the future in a Web3 world and beyond, and it is time to relook at what digital identity would mean in this new world order for both businesses and consumers across the globe.